Forexpros – Gold futures erased gains on Wednesday, retreating from a one-week high after the European Central Bank allotted a record amount of loans to European lenders at a refinancing operation earlier, underlining concerns over the health of the region’s banking sector.
On the Comex division of the New York Mercantile Exchange, gold futures for February delivery traded at USD1,616.05 a troy ounce during early U.S. morning trade, easing down 0.1%.
It earlier rose by as much as 1.6% to trade at USD1,643.65 a troy ounce, the highest since December 14.
Gold futures were likely to find short-term support at USD1,595.45 a troy ounce, the previous day’s low and resistance at USD1,645.65, the high of December 14.
Trading volumes were thin in many markets ahead of the Christmas holidays, resulting in volatile movements.
The ECB allotted EUR489.2 billion to 523 European lenders in its first offer of unlimited three-year loans earlier in the day, exceeding expectations for a total amount of EUR391 billion.
Gold prices initially spiked higher following the news, tracking strong gains in European equities and industrial commodities.
However, the move failed to alleviate concerns over the financial crisis in the region as the scale of the operation indicated that European lenders believe that funding shortages were likely to continue into 2012.
The euro erased gains against the U.S. dollar, re-approaching an 11-month low, while the dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, rose 0.1% to trade at 80.30, reversing an earlier decline of as much as 0.5%.
Gold has been pressured in recent months, with its safe haven appeal waning as investors prefer the U.S. dollar as their safe haven of choice amid Europe’s deepening sovereign debt crisis.
Year-end selling by hedge funds and tight liquidity in European interbank money markets have also contributed to recent price falls.
Prices have tumbled nearly 15% since hitting a record high of USD1920 in early September. Despite the slump, prices are still 13% higher on the year, on track for its 11th consecutive annual gain.
Elsewhere on the Comex, silver for March delivery dipped 0.5% to trade at USD29.38 a troy ounce, while copper for March delivery eased up 0.11% to trade at USD3.373 a pound.
Official customs data released earlier showed that China’s silver imports in November were down 43% from a year earlier to 232 tons. It was the third consecutive monthly decline and the lowest amount since January 2009.
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